WASHINGTON – Today, Homeland Security and Governmental Affairs Committee Chairman Tom Carper (D-Del.) welcomed a proposal from the Obama Administration that outlines a solution to curb excessive payments from the federal government to federal contractors.

In the legislative proposal announced today, the Administration would lower the cap for contractor compensation under federal contractors' cost-reimbursement contracts to the salary of the President, $400,000. Under current law, the amount federal agencies can spend for executive compensation is capped based on formula tied to executive compensation in the private sector, and the Office of Management and Budget is required to adjust the cap every year. However, as a result of escalating executive compensation packages in the private sector, the cap will rise this year to more than $950,000, compared to roughly $250,000 when the law was originally enacted by Congress in the 1990s. The Administration’s proposal would apply the lower compensation amount across-the-board to all defense and civilian cost-reimbursement contracts but would provide an exemption to allow agencies to pay more for specialized private sector expertise, in, for example, science and engineering, if necessary to support the agency’s mission.

For more information on the Administration’s proposal, please click here.

“Each year federal agencies spend over half a trillion taxpayer dollars on goods and services, a significant amount of money, particularly as the federal government grapples with ongoing budget cuts and a massive federal debt,” said Chairman Carper. “It is critical that agencies do all that they can to ensure that these taxpayer dollars are being spent prudently and effectively – and contractors’ pay is no exception. For too long, federal contractors have received inflated compensations from federal coffers based on an outdated formula, leaving taxpayers with the hefty bill. At a time when agency workers face furloughs and pay freezes, it is unacceptable for this type of compensation to continue. I welcome the Administration’s proposal to fix this problem and I intend to work with my colleagues, the Administration, and other stakeholders to implement a better process that’s fair to contractors and, most importantly, fair to American taxpayers.”